Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2009. / Includes bibliographical references (p. 141-145). / Chapter 1 studies the optimal strategies of a monopolist selling a good to consumers who engage in word of mouth communication. The monopolist uses the price it charges to influence both the proportion of the population that is willing to purchase the good and the pattern of communication that takes place within the social network. I find a number of results: (i) demand is more elastic in the presence of word of mouth; (ii) the monopolist reduces the price to induce additional word of mouth for regular goods, however for goods whose valuation is greater for well connected individuals the price may, in fact, be greater; (iii) the optimal pattern of diffusion involves introductory prices which vary up and down; and (iv) exclusive (high priced) products will optimally target advertising towards individuals with many friends whereas common (low priced) products will target individuals with fewer friends. Chapter 2 presents a model of friendship formation in a social network. During each period a new player enters the social network, this player searches for and forms friendships with the existing population and all individuals play a prisoner's dilemma game with each of their friends. The set of friendships a player forms reveals some information to a friend about how likely she is to subsequently cooperate. Cooperative types are able to separate themselves from uncooperative types by becoming friends with people who know one another. / (cont.) The threat of communication amongst people who know one another prevents an uncooperative type mimicking a cooperative type. Chapter 3 analyzes the effects of policies which support electricity generation from intermittent technologies (wind, solar). I find that intermittent generation is a substitute for baseload technologies but may be complementary or substitutable for peaking/intermediate technologies. I characterize the long run implications of this for carbon emissions. / by Arthur Campbell. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 203-210). / This thesis examines the role that social networks play in developing economies. The first two chapters analyze econometric issues that arise when researchers work with sampled network data. The final two chapters study how the embedding of agents in a network affects a group's ability to overcome weak contracting institutions and what models of social learning are important in describing the diffusion of information. These chapters make use of experiments that I conducted in rural Karnataka, India. The first chapter (co-authored with Randall Lewis) examines the econometric difficulties that applied researchers face when using partially observed network data. In applied work, researchers generally construct networks from data collected from a partial sample of nodes. Treating this sampled network as the true network of interest, the researcher constructs statistics to describe the network or specific nodes and employs these statistics in regression or GMM analysis. This chapter shows that even if nodes are selected randomly, partial sampling leads to non-classical measurement error and therefore bias in estimates of the regression coefficients or GMM parameters. We provide analytical and numerical examples to illustrate the severity of the biases in common applications and discuss possible solutions. Our analysis of the sampling problem as well as the proposed solutions are applied to rich network data of Banerjee et al. (2012) from 43 villages in Karnataka, India. In the second chapter, 1 develop an econometric method to cope with sampled network data. I develop a method, graphical reconstruction, by which a researcher can consistently estimate the economic parameters of interest. Graphical reconstruction uses the available (partial) network data to predict the missing links and uses these predictions to mitigate the biases. As each network may be generated by a different network formation model, the asymptotic theory allows for heterogeneity in the network formation process across graphs. The third chapter (co-authored with Cynthia Kinnan and Horacio Larreguy) analyzes how social networks affect the provision of informal insurance. Social networks are understood to play an important role in smoothing consumption risk, particularly in developing countries where formal contracts are limited and financial development is low. Yet understanding why social networks matter is confounded by endogeneity of risk-sharing partners. This chapter, first, examines the causal effect of close social ties between individuals on their ability to informally insure one another. Second, we examine how the interaction of social proximity and access to savings affects consumption smoothing. Theoretically, they could be complements or substitutes. Savings access may crowd out insurance unless social proximity is high, in which case it benefits the highly connected. Or savings may crowd out risk sharing among the highly connected while helping the less connected smooth risk intertemporally. By conducting a framed field experiment in Karnataka, India, we study the relationships between inability to commit to insurance, ability to save, and social proximity. We find that limited commitment reduces risk sharing, but social proximity / (cont.) substitutes for commitment. On net, savings allows individuals to smooth risk that cannot be shared interpersonally, with the largest benefits for those who are weakly connected in the network. The final chapter (co-authored with my classmates Horacio Larreguy and Juan Pablo Xandri) attempts to determine which models of social learning on networks best describe empirical behavior. Theory has focused on two leading models of social learning on networks: Bayesian and DeGroot rules of thumb learning. These models can yield greatly divergent behavior; individuals employing rules of thumb often double-count information and may not exhibit convergent behavior in the long run. By conducting a unique lab experiment in rural Karnataka, India, set up to exactly differentiate between these two models, we test which model best describes social learning processes on networks. We study experiments in which seven individuals are placed into a network, each with full knowledge of its structure. The participants attempt to learn the underlying (binary) state of the world. Individuals receive independent, identically distributed signals about the state in the first period only; thereafter, individuals make guesses about the underlying state of the world and these guesses are transmitted to their neighbors at the beginning of the following round. We consider various environments including incomplete information Bayesian models and provide evidence that individuals are best described by DeGroot models wherein they either take simple majority of opinions in their neighborhood. / by Arun Gautham Chandrasekhar. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2014. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 150-160). / This thesis consists of three methodological contributions to the literature on the regression discontinuity (RD) design. The first two chapters develop approaches to the extrapolation of treatment effects away from the cutoff in RD and use them to study the achievement effects of attending selective public schools, known as exam schools, in Boston. The third chapter develops an adaptive bandwidth choice algorithm for local polynomial regression-based RD estimators. The first chapter develops a latent factor-based approach to RD extrapolation that is then used to estimate effects of exam school attendance for infra-marginal 7th grade applicants. Achievement gains from Boston exam schools are larger for applicants with lower English and Math abilities. I also use the model to predict the effects of introducing either minority or socioeconomic preferences in exam school admissions. Affirmative action has modest average effects on achievement, while increasing the achievement of the applicants who gain access to exam schools as a result. The second chapter, written jointly with Joshua Angrist, develops a covariate-based approach to RD extrapolation that is then used to estimate effects of exam school attendance for infra-marginal 9th grade applicants. The estimates suggest that the causal effects of exam school attendance for applicants with running variable values well away from admissions cutoffs differ little from those for applicants with values that put them on the margin of acceptance. The third chapter develops an adaptive bandwidth choice algorithm for local polynomial regression-based RD estimators. The algorithm allows for different choices for the order of polynomial and kernel function. In addition, the algorithm automatically takes into account the inclusion of additional covariates as well as alternative assumptions on the variance-covariance structure of the error terms. I show that the algorithm produces a consistent estimator of the asymptotically optimal bandwidth and that the resulting regression discontinuity estimator satisfies the asymptotic optimality criterion of Li (1987). Finally, I provide Monte Carlo evidence suggesting that the proposed algorithm also performs well in finite samples. / by Miikka Rokkanen. / Ph. D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2018. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Cataloged student-submitted from PDF version of thesis. / Includes bibliographical references (pages 159-165). / This thesis studies three questions in the economics of water resource management. Chapter 1 estimates the economic gains available from greater use of large-scale water markets in California. I develop a revealed-preference empirical approach that exploits observed choices in the existing water market, and I apply it to comprehensive new data on California's water economy. This approach overcomes the challenge posed by transaction costs, which insert an unobservable wedge between observed prices and marginal valuations. First, I directly estimate transaction costs and use them to recover equilibrium marginal valuations. Then, I use supply shocks to estimate price elasticities of demand, which govern how marginal valuations vary with quantity. I find even a relatively modest market scenario would create additional benefits of $480 million per year, which can be weighed against both the benefits of existing market restrictions and the setup costs of larger-scale markets. Chapter 2 estimates the possible costs of industrial water pollution to agriculture in India, focusing on 63 industrial sites identified by the central government as "severely polluted." I exploit the spatial discontinuity in pollution concentrations that these sites generate along a river. First, I show that these sites do in fact coincide with a large, discontinuous rise in pollutant concentrations in the nearest river. Then, I find some evidence that agricultural revenues may be substantially lower in districts immediately downstream of polluting sites, relative to districts immediately upstream of the same site in the same year. These results suggest that damages to agriculture could represent a major cost of water pollution. Chapter 3, co-authored with Ariel Zucker, presents an experimental protocol for a project that pays smallholder farmers in India to reduce their consumption of groundwater. This project will test the effectiveness of payments for voluntary conservation - a policy instrument that may be able to sidestep regulatory constraints common in developing countries. It will also measure the price response of demand for groundwater in irrigated agriculture, a key input to many possible reforms. Evidence from a pilot suggests that the program may have reduced groundwater pumping by a large amount, though confidence intervals are wide. / by Nicholas W. Hagerty. / Ph. D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2018. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 209-219). / This thesis studies three questions in development economics. Chapter 1, co-authored with Shilpa Aggarwal and Rebecca Dizon-Ross, explores how the design of incentives should vary with the time preferences of agents. We formulate predictions for two incentive contract variations that should increase efficacy for myopic agents relative to patient ones: increasing the frequency of incentive payments, and making the contract "dynamically non-separable" by only rewarding compliance in a given period if the agent complies in a minimum number of other periods. We test the efficacy of these variations, and their interactions with time preferences, using a randomized evaluation of an incentives program for exercise among 3,200 diabetics in India. On average, providing incentives increases daily walking by 1,300 steps or roughly 13 minutes of brisk walking, and decreases the health risk factors for diabetes. Increasing the frequency of payment does not increase effectiveness, suggesting limited impatience over payments. However, making the payment function dynamically non-separable increases cost-effectiveness. Consistent with our theoretical predictions, agent impatience over walking appears to play a role in non-separability's efficacy: both heterogeneity analysis based on measured impatience and a calibrated model suggest that the non-separable contract works better for the impatient. Chapter 2 presents evidence that the standard electricity billing process contributes to inelastic demand. The paper assesses the elasticity of demand for electricity for customers using two metering and billing technologies. The first technology, postpaid metering, allows customers to use energy and subsequently bills them for the amount utilized. Many features of this system may reduce attentiveness to the marginal price of energy-consuming activities: electricity prices are buried in monthly bills; charges are aggregated over a lengthy billing period, making it difficult to match energy-consuming behaviors to kilowatt-hours used; and bills are delivered after consumption, potentially making cost less salient at the time of consumption. The second technology, prepaid metering, requires customers to purchase electricity prior to its use (similar to a prepaid phone plan). I find that customers who are charged under the second technology are approximately twice as price-elastic as those who are billed later. Chapter 3, co-authored with Nick Hagerty, presents an experimental protocol for a project that pays smallholder farmers in India to reduce their consumption of groundwater. This project will test the effectiveness of payments for voluntary conservation - a policy instrument that may be able to sidestep regulatory constraints common in developing countries. It will also measure the price response of demand for groundwater in irrigated agriculture, a key input to many possible reforms. Evidence from a pilot suggests that the program may have reduced groundwater pumping by a large amount, though confidence intervals are wide. / by Ariel D. Zucker. / Ph. D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 1983. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY / Bibliography: leaves 187-189. / by Severin J. Borenstein. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / Includes bibliographical references. / These essays are concerned with the problem of cooperation among individuals in a household and among households in a community under lack of commitment. The first chapter provides a theoretical investigation of consumption patterns in a household in which income is stochastic and some expenditures are public to household members. It is shown that in the constrained efficient agreement, private expenditures of household members do not necessarily co-move, as they do in both the first-best agreement and the constrained efficient agreement when all expenditures are private. In particular, the absence of co-movement of private expenditures in the household do not necessarily imply the absence of mutual insurance; and, indeed, negative correlation in private expenditures can be consistent with a cooperative agreement. These results indicate that caution should be used in interpreting the correlation of private expenditures of household members as a measure of cooperation and mutual insurance within the household. Chapter two investigates the effect of lack of commitment on household savings in a constrained efficient mutual insurance agreement among different households. / (cont.) It is shown that a saving rule is part of the agreement if and only if risk aversion changes with wealth. If not, no gains can be had from contracting on savings. Under reasonable assumptions about risk preferences, the constrained efficient agreement tends to depress savings to a greater extent for poorer individuals than for richer individuals, thus increasing inequality in consumption and wealth over time relative to the case where savings are not contracted. Chapter three (co-authored with Harounan Kazianga) provides evidence, using a survey of agricultural households in Burkina Faso, that plots owned by the head of the household is farmed much more intensively than plots, with similar characteristics and planted to the same crops, owned by other household members (of both genders). As in previous studies, this evidence is inconsistent with the assumption of Pareto efficiency in household decisions, but additionally suggests that status within the household rather than gender per se may be the most important factor in determining the allocation of productive resources within the household. We argue that the higher yields achieved by the household head may be explained in terms of social norms that require him to spend the earnings from some farms under his control exclusively on household public goods, as has been observed in the anthropological literature on this region. / by Zaki Wahhaj. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001. / Leaf 125 blank. / Includes bibliographical references (leaves 118-124). / This thesis is a contribution to the theory and empirics of inequality, redistribution and growth. It is divided in three chapters. Two of them study theoretical models of inequality, wealth-based politics and redistribution. The third chapter is an empirical contribution to the literature on growth and the income distribution In the first chapter, we explore the theoretical relation between economic and political inequality and redistribution policy. Using a static model of politics in which wealth determines political power, we study the relationship between a society's level of inequality, its political system, and the redistributive policies it will choose. We explore the widely used argument that the wealthier have more political power which they can use to oppose efficient redistributions. We show that the effect of a rise in inequality on the wealth of the decisive voter does not depend on the wealth bias in the political system per se, but on the extent to which political power is unequally distributed relative to the initial level of wealth inequality. Moreover, we find that the curvature of the political function that links wealth to political weight determines how political power is shifted from the poor to the rich following a rise in inequality. We illustrate these results by using three simple political mechanisms, including a widely used model of political exclusion based on wealth. We show that, contrary to the usual argument, societies where political participation is limited to a small wealthy elite are more subject to redistributive pressures when their level of inequality increases, compared to less exclusive societies. / (cont.) We use specific historical examples to support the implications of the model. The second chapter extends the model presented in chapter one to a two-period framework. The idea is to model how the prospect of future distributional conflicts affect present choices of redistribution and political reform when wealth gives political power. The aim of the model is to shed some light on the incentives of the politically powerful to pursue distributional policies that can be growth enhancing, when these policies adversely affect their future political weight. We illustrate this dynamic distributional conflict using two simple models of political power, where political weight depend on wealth or on rank in the income distribution. We show that the more wealth-biased the political system, the lower will be the redistribution rate in period 1, as the future political cost of redistributing is higher. We also provide some insights on how these dynamics behave when considering a more general form of political system. Finally, we introduce political change into the framework and present a model of franchise extension and redistribution that entails a risk of revolution. We find that when political weight is based on wealth, then an elite which chooses not to extend the franchise early, will choose a higher rate of redistribution, the higher the probability of a revolution occurring in period 2. The idea being that in a wealth-based political system, the expected future political cost of redistributing income in the first period is lower, the higher the probability that a revolution abolishes this wealth-based system ... / by Najay Benhassine. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references. / This thesis consists of three unrelated essays in the fields of labor and urban economics. The first essay exploits the creation of a formal college system in Quebec in the late 1960's as a quasi-experiment to estimate the value of community college. Focusing on the effect of the policy on English-speaking Quebecois, the creation of the CEGEPs (Colleges of General and Vocational Education) is shown to increase schooling by about a third of a year for both men and women, without diverting students from university. Despite increasing educational attainment, estimates of the impact of CEGEP on wages are negative. Analysis suggests the negative estimates can be understood as a combination of lost labor market experience, a decrease in the return to university, and an insignificant return to CEGEP. The results are robust to the inclusion of controls and across years of data. Possible interpretations of the results are discussed. The second essay, co-authored with William Wheaton, examinesthe relationship between labor market agglomeration and wages. Using the 5% public use micro sample of the 1990 U.S. census, we find that observationally equivalent workers in the manufacturing sector earn higher wages when they are in urban labor markets that have a larger share of national or metropolitan employment in their same occupation and industry groups. Quantitatively, the effect is large, with an elasticity (measured at the means) of between 1.2 and 3.6 for these effects. We interpret the willingness of firms to pay more for equivalent workers in dense markets as evidence of an agglomeration economy in urban labor. The third chapter estimates the effect of employment dispersion on average commute times in American cities. Using a sample of over two hundred cities, I find that residents of cities where employment is more geographically disperse have lower average commute times than residents of cities where employment is more centralized. The results are robust to theinclusion of city fixed effects. An instrumental variables strategy is employed to try to account for potential simultaneity between changes in employment dispersion and changes in commute times. / by Mark Johnson Lewis. / Ph.D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2000. / Includes bibliographical references (leaves 144-150). / Chapter 2: This chapter analyzes the speed of price adjustment in the aftermath of 207 currency crises in 67 countries between 1957 and 1998. The result of slowly adjusting prices in the context of large shocks to the nominal exchange rate found in previous empirical studies is shown to depend crucially on their identification of the post-crisis equilibrium exchange rate, and in particular the hypothesis that large nominal shocks have no permanent effects either on the level or on the trend of the equilibrium real exchange rate. When large shocks to the nominal exchange rate are allowed to be associated with permanent effects, the adjustment of the real exchange rate--i.e. the convergence to the post-crisis path~is found to be very fast, taking place within one month of the crisis for 65% of the episodes and, on average, 6-7 months for the remaining 35%. Significantly, approximately 30% of the adjustment of the real exchange rate to its new path is found to be, on average, due to prices. This pattern of quick adjustment to a new real exchange rate after a crisis is confirmed when the cross-section of crisis episodes is used to characterize the typical crisis experience. Chapter 3: This chapter analyzes the response of job flows by new establishments and shutdowns to the level of the real exchange rate between 1973 and 1993, and finds robust evidence of hysteresis in the structure of US 2-digit manufacturing industries. Following a transitory appreciation of the real exchange rate, employment in manufacturing industries is found to drop permanently, following a fall in the employment stock both of continuing firms, and of firms at the entry-exit margins. Starkly, the drop in job destruction explains most if not all of these facts. These results suggest that although the effects of the real exchange rate on US manufacturing job structure may appear quantitatively small, their persistence makes them an important determinant of the reallocation process of (human) resources. Thus we find support for the classical view that exchange rate shocks relocate labor in and out of the tradable sector depending on whether it is a devaluation or an appreciation. Also, as could be expected from hysteresis models, shutdowns and start-ups systematically account for a disproportionate amount of the response of job destruction and job creation to changes in the real exchange rate. Chapter 4: This chapter shows that the debate on the Tobin transaction tax, which has focused predominantly on issues of implementability and inefficiencies, is misguided, as in a generic model of noise traders, neither the general equilibrium effects nor the endogenous exit of investors are likely to reduce return volatility. In fact, volatility is likely to increase, a prediction that is borne out in available evidence on transaction tax experiments. Finally, this chapter examines several alternatives to the Tobin tax which hold potentially better prospects. / by Christian Frois. / Ph.D.